REAL WAGES, INFLATION AND LABOR PRODUCTIVITY: AN EVALUATION WITHIN TURKISH CONTEXT

Nowadays, where being competitive is considered equal to productivity, productivity and factors affecting productivity constitute a popular discussion area. Hence, as the relevant literature is reviewed, it was observed that attention focuses on labor productivity and on the relationship between wages and inflation, which are considered as the factors that affect the productivity. In this study, while cointegration test of Johansen (1988) and Johansen/Juselius (1990) was used to investigate whether there is a long-term relationship or not between real wages, productivity and inflation in Turkey during the period 1988-2012, the direction of this relationship was examined via the Vector Error Correction Model (VECM). The results demonstrated a long-term relationship between all three variables and the direction of this relationship in the long-term was determined as, from productivity and inflation towards the real wages. Moreover, in short-term, a causality relationship was determined both from inflation to real wages and from inflation to productivity. On the other hand, the identification of the negative effect of the crises on productivity is one of the important results reached by this study